Distressed debt research support for a US-based mid-sized asset manager firm

About Client:

A mid-sized buy-side firm reached out to ValueAdd for stressed/ distressed debt origination support; it was a referral through one of our clients. The firm was looking for a distressed debt origination support to increase the funnel of ideas at optimal research cost

Business Problem:

Client had only one credit analysts supporting two fund managers. Used to heavily rely on sell-side research by banks, and market intelligence however, clearly it was suboptimal. Hence, client needed a mechanism to smartly originate new distressed ideas.

ValueAdd Solution:

ValueAdd allocated one credit research analyst supported by a Delivery Manager, for new distressed debt origination.

Systematic screening process:

  • ValueAdd facilitates efficient origination process by running smart screens using distressed news and sectors screens on 3rd party databases e.g. Bloomberg
  • Prepares insightful tearsheets for global credits across sectors and stressed/ distressed/ Reorg/ liquidation cases

Detailed recovery models:

  • Perform detailed liquidation and recovery models based on different assumptions
  • Detailed debt structure based on Waterfall model
  • Detailed organization structure with issuers, guarantors, and cross-guarantees
  • Build sensitivities based on operating metrics, commodity prices, and asset pricing.

Benefits Delivered:

  • Led to a saving of ~US$30,000, and counting
  • Led to acceleration of idea generation and quick investment decisions
  • Increase depth of research on ideas, due to increased client bandwidth
  • In addition, client could focus on raising capital for their upcoming distressed opportunities funds. Have launched 4 funds so far
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